JOE: Let’s get to Becky who is in Omaha this morning. She’s with Berkshire Hathaway chairman and CEO Warren Buffett.
Becky, I was — I don’t know — leading into the last break, I was thinking about, I don’t know whether you saw Barron’s, there was a Jeremy Grantham piece that was very troubling to me and I wanted to just at some point ask Warren about…
BECKY: Why don’t you ask him now?
JOE: Yeah. OK. Warren, his basic thrust was that our middle class has been getting more and more decimated over the years as a lot of the cheap labor is found in the rest of the world where obviously the standard of living is not as high and it’s just been a natural progression to send a lot of the jobs overseas. As a result, the middle class has had to borrow to fund a lifestyle and that’s one of the reasons that the consumer is so strapped at this point. And it’s a very negative piece where basically looking for another seven years or so of sub-par growth because of this and I don’t know what the answer is. I think he — re-education or more to try to become up to, you know, more competitive or at least better than the rest of the world at doing things for our labor force. Do you have an answer for that?
BUFFETT: Yeah, the answer is, you know, our market system has worked well for 200-plus years. It’s working well now in all areas except home construction, those related to home construction. You know, we’re sitting here where the market has doubled from three years ago when we were sitting here. This country is remarkable. I mean, you have — you have people at our own company, you’ve got Tony Nicely at GEICO trying to figure out how to — how to serve customers better tomorrow, how to bring down costs. You’ve got Matt Rose trying to plan for the future of railroads in Fort Worth today and tomorrow. You’ve got people at Apple trying to come up with new products that you and I haven’t thought of yet. America — American capitalism is dynamic, so anytime you look at it on a static basis, you can get very pessimistic.
And while I got out of school in 1951, the two people I revered most in the world, my dad and Ben Graham, told me it was a bad time to start in business, you know. It — you can sit down at the start of every year and write down 10 or 20 reasons why it’s, you know, things are terrible. But the truth is, this economy works wonderfully. It’s working wonderfully now. I mean, it isn’t working for everybody at this moment and it’s coming back from a terrible shock that it received in the fall of 2008. But look how far it’s come back and it continues to come back every day. It’s been doing it now since the fall of 2009. So it’s, you know, it is — it is a terrible mistake to get pessimistic on America. You know, it has not worked since 1776 and it’s not going to start working now.
BECKY: Warren, we touched on this in the last hour, but just the idea, you bring up that the stock market has doubled over the last three years when we’ve been sitting here and again, there are many people who now worry that the best and easiest gains are over. You said yourself in the last hour that it’s not springtime anymore.
BECKY: Does that change what people — the way that people should be looking at the stock market as a potential investment?
BUFFETT: They should be looking at the funds they’re going to save. I mean, that’s the — those are the only funds you save that you invest with, and figure out what’s the best thing to do with them. And they can buy farmland, they can buy apartment houses, they can buy duplexes, they can buy businesses, they can buy businesses through stocks, they can buy rare stamps, they can buy gold or they can stick it in money market accounts and all. They’ve always got all those options. And I’ve written a section in the annual report why I think that businesses are the best option. Now the nice thing about businesses is in this country is you can buy into all the best businesses in the United States, virtually. You can buy a piece of them and you don’t have to buy, you know, if you don’t understand company XYZ, you can buy company ABC. And naturally, it would be like — nicer to buy them at the prices of three years ago.
BUFFETT: But you know, they are attractive relative to other assets. That doesn’t mean they’re going to go up, but I will guarantee you that over a 20 or 30 year period, they’re going to perform very well. And as I mentioned a little earlier, actually single family houses bought on a distressed basis now and financed over a long term at these interest rates may be the best investment of all. I mean, if I knew anything about real estate and I just was working with a relatively small amount of money and I was seeing distressed houses around me that I could rent out, I would buy them and put on an 80 — a 4 percent mortgage for 30 years and you know, I — three or four or five years, I’d probably sell it at a very substantial profit relative to my equity.
BECKY: Mm-hmm. OK. You know, Warren, we left off in the last break talking about taxes and your role in this tax debate has become very central and very polarizing. And just the last week Governor Chris Christie of New Jersey weighed in on this and weighed in on what you’ve been saying. Take a listen to what he had to say.
PIERS MORGAN, CNN (On tape): Warren Buffett keeps screaming to be taxed more.
Governor CHRIS CHRISTIE (R-New Jersey): Yeah. Well, he should just write a check and shut up. Really, and just contribute, OK? I mean, you know, the fact of the matter is that I’m tired of hearing about it. If he wants to give the government more money, he’s got the ability to write a check. Go ahead and write it.
BECKY: He’s not the only person who feels that way.
BECKY: We’ve got a lot of viewer email that came in. We’ve been sitting down and doing this ask Warren session here for I guess the last four years or so.
BUFFETT: Mm-hmm. Yeah.
BECKY: And this year